“When inflation is at 8% or 9%, we risk deviating from inflation expectations,” Kashkari said in an appearance Tuesday , if that happens, the Fed may have to resort to very aggressive rate hikes to restore balance.
“We definitely want to avoid letting this develop,” Kashkari said. “So for me, inflation is so high, I’m in the midst of wanting to make sure we’re bringing inflation down and only if we see convincing evidence that inflation is coming back down to 2%. The mode of relaxation,”
The consumer price index in July rose 8.5% over the same period last year.
Kashkari said his “biggest fear” is that inflation will be more persistent than many now expect. He also said much of the inflation surge was related to supply chain issues.
An expanded version of this report appears in The Wall Street Journal. com.
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